Sustainability driven by innovation not cost: Food Business Summit survey

Recently released research by KPMG International and CIES reveals that, far from regarding corporate responsibility as a cost, many leading retailers and manufacturers see sustainability as:
• a driver of innovation that can help build growth and profitability
• integrated into the core business
• driven by business need rather than formal requirements
• having a neutral or positive impact on the bottom line
• playing a crucial role in recruitment and retention

The report, ‘KPMG/CIES Survey 2008 – A survey into the growth and sustainability issues driving consumer organizations worldwide‘, synthesizes the views of over a quarter of the 750+ delegates attending the three-day CIES World Food Business Summit held in Munich, Germany – its focus ‘Growth and Sustainability: Building Profit with Responsibility.’ The wide-ranging research pinpoints the impact the economic downturn is likely to have on companies’ commitment to sustainability and the challenges many businesses still face in identifying priorities in this area.

Nearly half of those questioned (47.7 per cent) felt sustainability was an important driver of innovation. This was true of companies worldwide. A majority (56.5 per cent) stated that sustainability was now a core element of business strategy.

The results also help pinpoint the forces driving the sustainability agenda, with over a third of companies (34.9 per cent) identifying ‘stakeholder demand’ over other pressures such as legal requirements, voluntary codes, taxes and carbon costs. “This confirms that the adoption of sustainable business strategies is not primarily driven by formal requirements, but rather by the imperative of business need,” commented Neil Austin, Global Chairman, Consumer Markets, KPMG in the U.K.

Gareth Ackerman, joint Chairman of the CIES Summit Committee & Pick ‘n’ Pay Holdings Ltd., pointed out the broad nature of sustainability issues facing companies. “Sustainability is not just about protecting the environment,” he noted. “It has to do with issues such as food security, food safety, job creation and individual prosperity, healthy eating, fair trade and ethical sourcing of products, labor rights, customer loyalty and poverty alleviation.”

Just over 80 per cent of the companies surveyed indicated the greatest challenge they face in developing a sustainability strategy lies in identifying and prioritizing issues, developing strategies to meet those issues, and measuring performance.

“The focus has moved away from the publication of a glossy corporate responsibility report to the more challenging exercise of identifying and prioritizing material issues,” Wim Bartels, Global Sustainability Services, KPMG in the Netherlands, said. “However, the research reveals the surprising number of companies (15.5%) still without any sort of sustainability strategy; with businesses in EMEA the worst offenders (18.6%). Another cloud is the prospect of an economic downturn and how this might impact companies’ commitment to sustainability. Just over half (52.8%) believe that sustainability investment will either be put on hold or reduced in an economic downturn. The remainder reported that the impact will have a neutral or positive impact on sustainability investment.”

Further cautious optimism is echoed in the prospects for growth in their sector. It reveals that a majority of businesses are turning away from diversification, acquisitions and alliances, as focus shifts towards organic growth (54.8%).

The survey also highlights those companies most likely to tackle the recruitment and retention hurdle. The companies most positive about the impact of sustainability on their bottom line appear also the most concerned about their human capital (39%).

The link is significant given the majority of organizations surveyed regard recruitment and retention as top of the list of challenges to their growth (30.6 percent) – ahead even of a slowdown in consumer demand (29.7 per cent) and increased costs of raw materials (27 per cent).

Mark Smith, partner from KPMG in Canada, agrees that sustainability is now fundamental to meeting the recruitment challenge. “At KPMG, we consider our corporate responsibility programs to be a significant contributing factor in attracting high caliber graduates,” he reported. “After pay and reward the opportunities to volunteer and other such activities are one of the most frequently asked questions during the graduate interview process.”